This quote comes from Chapter 3 of the book. In it, Kat is basically saying that they are losing the war because they are too obedient. Their army has given some people (the officers, in particular) too much power over the others. The others do not think at all for themselves. They just salute and do as they are told.
Because of this, says Remarque, the soldiers are dehumanized. They lose their individual personalities and are therefore less likely to function well in the war.
I do not really see, though, why loss of individuality is supposed to make them lose the war since the whole war is dehumanizing to both sides (as this book shows).